Dirty coal-fired aluminum gets a boost with new Trump tariff

It takes a lot of electricity to make aluminum; that why production went offshore.

The President of the United States recently announced a 25 percent tariff on steel imports and a 10 percent tariff on aluminum, in the name of national security. He thinks trade wars are good.

When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!

Advisers have been bitterly divided over how to proceed on the tariffs, including whether to impose them broadly on all steel and aluminum imports, which would ensnare allies like the European Union and Canada, or whether to tailor them more narrowly to target specific countries.

“Of the options that I presented, the president chose one -- which was put broad tariffs on all products from all countries,” Ross said in interview on Bloomberg TV. “We have to deal with a global problem on a global basis” to stamp out “this recurring phenomenon” of shipments going through other nations to evade tariffs.

This TreeHugger has no comment on whether trade wars are good for Americans, or whether Canada (supplier of most of the imported steel and aluminum) is a threat to the USA's national security. But I do care about its effect on the environment, particularly the aluminum tariff.

Bonneville Dam/via

Aluminum has been called "solid electricity" because of the amount used to make it (13,500 to 17,000 kWh per ton). That's why most of the aluminum smelters were built where the Tennessee Valley Authority and the Bonneville Power Authority could deliver cheap hydroelectric power.

Wikipedia/ Boeing building planes/Public Domain

The Bonneville and Grand Coulee dams were built by Franklin Roosevelt to create jobs during the depression, but the most important jobs they created were at Boeing and Douglas, who needed the aluminum for airplanes. As noted in our post on waste, after the war, the aluminum industry started cranking out single use packaging and aluminum foil. One energy expert I was discussing this with told me this morning:

When I was younger there was an anecdote making the rounds that eliminating aluminum foil would allow you to remove two dams from the Columbia. I’ve parsed out and reused foil ever since- and am mocked by my kids for it.

But while the population grew over the last 75 years, the number of dams cannot grow very much. The price of electricity kept rising to the point where making aluminum in the USA simply isn't economically viable; as Ana Swanson noted in the Washington Post last year when this issue first came up, "In Washington state, for instance, the smelters that used to operate near the hydroelectric power plants along the Columbia River have been priced out by the power-chugging server farms of tech companies such as Microsoft." So the companies moved their smelting to where power is cheap; to Iceland, which has lots of power and few people, and to Canada, where the Aluminum companies actually built dams and the power plants for their own use. American aluminum production dropped by three-quarters over the last few decades, squeezed by expensive electricity and cheaper coal-fired Chinese aluminum.

Century Aluminum said Thursday it will more than double production at a Kentucky smelter to 250,000 tons annually because of higher prices it expects to charge after the tariff is implemented. The company said the $100-million restart of idle smelting lines will double the plant’s workforce to 600 people.

That's good old Kentucky coal-fired aluminum production, which is for the President another bonus. But coal-fired aluminum produces 18 tonnes of CO2 equivalent for every tonne of aluminum made. Meanwhile, it probably means less "green" hydro powered aluminum will get imported.

The big Aluminum companies were already charging a small premium for low-carbon aluminum and even branded it; according to Reuters,

Rio Tinto is already selling branded RenewAl aluminum guaranteeing four tonnes or less of CO2 equivalent. Alcoa launched a product line called Sustana last year that includes Ecolum aluminum offering less than 2.5 tonnes - far below the industry average of around 11 tonnes.

Companies like Apple demand green aluminum but the value of the metal for them is a fraction of the value of the product. But not many other companies will pay both the green premium and the tariff.

For companies like Ford and Tesla, it is another story altogether. There is a LOT of aluminum in these vehicles and it just cost 10 percent more. Boeing just got less competitive with Airbus. Multiple family housing, which uses a lot of aluminum windows, just went up in price. But hey, maybe people will drink less canned soda and beer.

The immediate impact will be to make the U.S. an island of high-priced steel and aluminum. The U.S. companies will raise their prices to nearly match the tariffs while snatching some market share.... Instead of importing steel to make goods in America, many companies will simply import the finished product made from cheaper steel or aluminum abroad. Mr. Trump fancies himself the savior of the U.S. auto industry, but he might note that Ford Motor shares fell 3% Thursday and GM’s fell 4%. U.S. Steel gained 5.8%. Mr. Trump has handed a giant gift to foreign car makers, which will now have a cost advantage over Detroit. How do you think that will play in Michigan in 2020?

The President says "We're going to build our steel industry back and our aluminum industry back." But at least for aluminum, that ship has sailed, following the price of electricity. If it comes back, it is at the cost of the climate from burning coal for electricity, and at the cost of fuel efficiency for cars, as they slow the switch to light aluminum.

But hey, it's all in the name of National Security. As Commerce Secretary Wilbur Ross noted last year, aluminum is “a hugely important thing to defense.”

“Our industrial base is our most important, competitive weapon in any kind of global conflict,” he said. “I’m not a warmonger, but the best way to be sure you have to fight a war is if everybody knows you are incapable of defending yourself.”

Absolutely, Americans have to be ready to defend themselves from Canada.